Climate-energy bill debuts in Senate, but prospects are dim

A climate-energy bill – one intended to appeal to enough factions to proceed through the Senate – was unveiled Wednesday after months of negotiations. But it recently lost its Republican sponsor, complicating its future.

Sens. John Kerry, D-Mass., and Joseph Lieberman, I-Conn., at a news conference, with industry leaders, announcing their climate change bill on Capitol Hill in Washington, Wednesday, May 12, 2010.

Harry Hamburg/AP

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Nearly a year after the House of Representatives approved a comprehensive climate-energy bill, two US senators on Wednesday unveiled their own plan for weaning America off fossil fuel and slashing carbon emissions tied to global warming.

The bill's prospects are uncertain, at best. Some analysts give it less than a 50 percent chance of passage now that Senator Graham has withdrawn his support. Moreover, it includes provisions for new offshore oil drilling – a concession meant to enlist certain senators' backing – but the Gulf oil spill has made that aspect of the legislation a "political toxin," says Kevin Book, an energy expert with ClearView Energy Partners.

Still, the bill's authors say they are hopeful, arguing that their legislation would help unhook the nation from overreliance on foreign oil, which costs the US $1 billion a day, and create a new energy infrastructure to add jobs and curb carbon emissions.

“The American Power Act will finally change our nation’s energy policy from a national weakness into a national strength,” Senator Kerry said in a statement. “We can finally tell the world that America is ready to take back our role as the world’s clean energy leader. This is a bill for energy independence after a devastating oil spill, a bill to hold polluters accountable, a bill for billions of dollars to create the next generation of jobs, and a bill to end America’s addiction to foreign oil."

Germane to Obama's energy policy

Passage of a climate-energy bill in the Senate is crucial to President Obama's energy plans, which push wind, solar, and other renewable sources. Unless a price is put on each ton of carbon emissions, many analysts say, the Obama plan won't gain traction.

Like the House bill, the Senate bill unveiled by Kerry and Lieberman is designed to win votes by doling out revenues from the sale of pollution permits. But even with all the ornaments on what Mr. Book calls a "Christmas tree" bill, he still writes in his analysis that "Senator Graham’s retreat from active support of the bill makes it harder for Senators Kerry and Lieberman to muster a bipartisan consensus."

In addition, the Gulf of Mexico oil spill "has turned offshore drilling – an issue that once greased the wheels of the grand bargain – into a political toxin," he writes. Yet because "political winds can shift quickly," he adds, the Kerry-Lieberman bill "appears far closer than any of its predecessors to a climate bill that corporate stakeholders might actually want to pass."

The bill aims for a 17 percent cut in carbon pollution from 2005 levels by 2020, by reducing emissions from power plants and other industrial facilities. It goes on to call for a 42 percent reduction in carbon emissions by 2030 and 83 percent by 2050. It sets a price floor of $12 for each ton of carbon emissions, growing annually at 3 percent over inflation – with a $25-per-ton price ceiling increasing 5 percent annually.

What will happen to permit fees the government collects? Just about everyone who might want to vote for this bill would have some of their constituents get a cut.

"Two-thirds of revenues not dedicated to reducing our deficit are rebated back to consumers through energy bill discounts and direct rebates," Lieberman and Kerry said in a summary of the bill. "We also provide assistance to those Americans who may be disproportionately affected by potential increases in energy prices through tax cuts and an energy refund program."

A chicken in every pot

Other features of the bill would:

•Establish primacy of federal law for achieving cuts in greenhouse-gas emissions. States wouldn't be allowed to have their own cap-and-trade emissions programs.

•Spend $6 billion on transportation infrastructure to increase efficiency and decrease oil consumption, as well as on tax incentives to convert heavy-duty trucks from diesel fuel to natural gas. It includes funds for advanced vehicles and battery research.

•Boost offshore oil exploration. With the Gulf spill in mind, the bill offers "new protections for coastal states," letting them veto drilling up to 75 miles off their shores. States that allow drilling would get 37.5 percent of revenues from sale of the oil to help protect coastal ecosystems.

•Curb industrial emissions. Industrial emitters wouldn't enter the program until 2016. Prior to that, funds collected from emissions permits would be used to offset electricity and natural-gas rate increases for industrial rate-payers and to improve energy efficiency in manufacturing. In 2016, energy-intensive industries and industries exposed to trade threats would get emissions allowances to offset their compliance expense.

•Protect American firms from any trade disadvantage stemming from the bill. The bill would "phase in a World Trade Organization-consistent border adjustment mechanism." If no global pact on climate change is reached, the bill requires a surcharge on imports from countries that have not acted to limit carbon emissions.

Natural gas and nuclear power industries also would receive incentives to boost production.

With all the billions of dollars worth of permits being traded among polluters and markets, the bill aims to block market manipulations by requiring the largest sources of pollution – those with more than 25,000 tons of carbon pollution annually – to meet reduction targets. The program focuses on about 7,500 factories and power plants. Other measures would keep a close watch on "market makers" in auction and other markets.

Reviews are mixed

Business groups' reactions are across the spectrum. The US Chamber of Commerce, which has long opposed climate legislation, thanked the authors but reserved judgment, calling the bill a "work in progress." The Nuclear Energy Institute, the nuclear power trade association, praised the nuclear-related aspects of the bill as "a solid platform for the expansion of nuclear energy to meet our electricity needs."

Environmentalists' responses are mixed. Friends of the Earth called the bill "dangerous," saying it gives too many concessions to the nuclear and coal industries to gain support for a limit on carbon emissions. The Natural Resources Defense Council applauded it – with reservations about the expanded offshore oil drilling and the lack of minimum performance standards for the largest carbon polluters.